What changed in this filing

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Item 1A. Risk Factors

2026-02-27 compared with 2025-03-11 · 62 added, 41 removed, 243 unchanged (30% of the section changed)

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We serve customers and have locations throughout the world and are subject to terrorist attacks, acts of war, natural disasters, global pandemic and other similar risks, which could materially adversely affect our business, financial condition, and results of operations.

Worldwide economic conditions remain uncertain due to the persistence of inflation, elevated interest rates, market volatility and adverse effects on product demand connected to geopolitical developments including tariff uncertainty, and other disruptions to global and regional economies and markets.

Terrorist attacks, acts of war, natural disasters, global pandemics or other disasters or public health concerns in regions of the world where we have operations could result in the disruption of our business.

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Changes in the information technology industry and/or economic environment may reduce demand for the products and services we sell.

Our results of operations are influenced by a variety of factors, including the condition of the IT industry, general economic conditions, shifts in demand for, or availability of, computer products and software and IT services and industry introductions of new products, upgrades or methods of distribution.

Our results of operations are influenced by a variety of factors, including the condition of the IT industry, general economic conditions, seasonal buying by end-users, shifts in demand for, or availability of, computer products and software and IT services and industry introductions of new products, upgrades or methods of distribution.

We typically sell to our customers on a purchase order basis, rather than pursuant to long-term contracts or contracts with minimum purchase requirements.

Consequently, our sales are subject to demand variability by our customers.

The information technology products industry is characterized by abrupt changes in technology, rapid changes in customer preferences, short product life cycles and evolving industry standards.

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For example, the ability of customers to access their accounts, place orders, and otherwise interface with us using digital technology is an important aspect of the distribution industry, and distribution companies are rapidly introducing new digital and other technology-driven products and services that aim to offer a better customer experience and reduce costs.

If we are unable to maintain and enhance our digital platforms, cloud platforms, and artificial intelligence related tools to keep pace with competitors and align with evolving customer and supplier expectations and demands, it could adversely impact our sales revenues and ability to retain existing, and attract new, customers.

Our sales are also partially dependent on continued innovations in solutions by our suppliers, the competitiveness of our suppliers’ offerings, and our ability to partner with new and emerging technology providers.

If we are unable to maintain and enhance our digital platforms, cloud platforms, and AI-related tools to keep pace with competitors and align with evolving customer and supplier expectations and demands, it could adversely impact our sales revenues and ability to retain existing, and attract new, customers.

We currently incorporate AI technology in certain offerings and in our business operations.

AI systems are complex, rapidly changing, and may not operate as intended.

Use of AI could lead to unintended consequences, including exposing us to additional risks related to cybersecurity, privacy and data security, such as the risk of increased vulnerability to cybersecurity threats and exposure, impacts to the stability of our operations, the inadvertent disclosure, misuse, or corruption of intellectual property, confidential, personal, or competitively sensitive information that could affect our reputation.

Our efforts to expand AI capabilities within our products and internal functions involve risks, costs and operational challenges.

Although we aim to design, develop, and deploy AI responsibly and to identify and mitigate associated ethical, legal and technical risks, we may not detect or resolve issues before they occur.

AI technologies are complex and rapidly evolving, we face significant competition in the market and from other companies regarding such technologies.

Further, the legal and regulatory landscape for AI is rapidly evolving and uncertain, and requirements may differ across jurisdictions.

Compliance with new or existing AI-related laws, regulations, or government guidance—including emerging frameworks such as those in the European Union—may impose significant costs, restrict our ability to integrate certain AI capabilities, or expose us to liability.

Failures, deficiencies, or misuse of AI technologies could result in regulatory inquiries or actions, litigation or reputational damage, any of which could materially harm our business.

We may have difficulty offering customers solutions that anticipate and respond to rapid and continuing changes in technology and which meet their evolving demands.

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Many competitors compete based principally on price and may have lower costs or accept lower selling prices than we do and, therefore, our gross margins may not be maintainable.

Our gross margins have declined historically and may continue to decline in the future.

As a result of significant price competition in the IT industry, our gross margins are low, and we expect them to continue to be low in the future.

Increased competition arising from industry consolidation and low demand for certain IT products and services may hinder our ability to maintain or improve our gross margins.

These low gross margins magnify the impact of variations in gross billings and operating costs on our operating results.

A portion of our operating expenses are relatively fixed, and planned expenditures are based in part on anticipated orders that are forecasted with limited visibility of future demand.

As a result, we may not be able to reduce our operating expenses to sufficiently mitigate any further reductions in gross profit or margin in the future.

If we cannot proportionately decrease our cost structure in response to competitive price pressures, our business and operating results could suffer.

Our competitors may offer better or different products and services than we offer.

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Our business is substantially dependent on a limited number of customers and vendors, and the loss or any change in the business habits of such key customers or vendors may have a material adverse effect on our financial position and results of operations.

Our business experiences customer and vendor concentration from time to time.

Because our standing arrangements and agreements with our customers and vendors typically contain no purchase or sale obligations and are terminable by either party upon several months or otherwise relatively short notice, we are subject to significant risks associated with the loss or change at any time in the business habits and financial condition of key customers or vendors.

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Accordingly, we are at a continual risk of loss of their business on account of a number of factors and forces, many of which are largely beyond our control.

In 2024, ou r two la rgest customers accounted f or 32% of our net sales and our largest five customers accounted for 54% of our net sales.

In 2025, o ur two largest customers accounted for 37% of our net sales and our largest five customers accounted for 55% of o ur net sales.

If any of our significant customer relationships terminate for any reason, and we are not able to replace those customers and associated revenues, our financial position and results of operations would be adversely affected.

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Our ability to provide such services is dependent largely on the accuracy, quality and utilization of the information generated by our IT systems, which affect our ability to manage our sales, client service, distribution, inventories and accounting systems and the reliability of our data networks.

Failure to adequately maintain the security of our electronic and other confidential information could materially adversely affect our financial condition and results of operations.

We are dependent upon automated information technology processes.

Privacy, security, and compliance concerns have continued to increase as technology has evolved to facilitate commerce and as cross-border commerce increases.

As part of our normal business activities, we collect and store certain confidential information, including personal information of employees and information about partners and clients which may be entitled to protection under several regulatory regimes.

In the course of normal and customary business practice, we may share some of this information with vendors who assist us with certain aspects of our business.

Moreover, the success of our operations depends upon the secure transmission of confidential and personal data over public networks, including the use of cashless payments.

Althou gh we did not have any material cybersecurity breaches in 2024, any failure on the part of us or our vendors to maintain the security of data we are required to protect, including via the penetration of our network security and the misappropriation of confidential and personal information, could result in business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs, and also result in deterioration in our employees’, partners’ and clients’ confidence in us and other competitive disadvantages, and thus could have a material adverse impact on our business, financial condition and results of operations.

Failure to adequately maintain the security of our electronic systems and confidential information could materially adversely affect our business, financial condition and results of operations.

We are dependent on automated information technology systems to conduct our operations, and privacy, data security and regulatory compliance risks have increased as technology has evolved and as our business and cross-border activities have expanded.

In the ordinary course of our business, we collect, process and store confidential information, including personal information relating to our employees and information relating to our partners and clients, much of which is subject to protection under applicable data protection, privacy and cybersecurity laws and regulations.

We also routinely share certain of this information with third-party vendors and service providers that support our operations.

The secure transmission and storage of confidential and personal information over public and private networks, including in connection with electronic and cashless payment systems, is critical to our business.

Althou gh we did not experience any material cybersecurity breaches in 2025, our systems and those of our third-party vendors may be vulnerable to cybersecurity incidents, including unauthorized access, ransomware, malware, phishing or other attacks, system failures, human error or misconduct.

Any failure by us or our vendors to prevent or mitigate such incidents, including a compromise of network security or misappropriation of confidential or personal information, could result in business interruption, loss of data, reputational harm, contractual or other financial obligations, fines, penalties, regulatory investigations or proceedings and private litigation, as well as a loss of confidence by our employees, partners and clients, any of which could have a material adverse effect on our business, financial condition and results of operations.

We rely heavily on our internal information systems, which, if not properly functioning, could materially adversely affect our business.

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Failure to properly or adequately address such issues could impact our ability to perform necessary business operations, which could materially adversely affect our business.

Technologies used in or integrated into our operations, such as cloud-based services, artificial intelligence, and automation, may cause an adverse shift in the way our existing business operations are conducted.

Technologies used in or integrated into our operations, such as cloud-based services, AI, and automation, may cause an adverse shift in the way our existing business operations are conducted.

We depend on certain key personnel.

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We may explore additional growth through acquisitions.

During the year ended December 31, 2024, we completed one acquisition to expand our sales presence in the United States distribution operations and bring key vendor partner relationships to our portfolio.

We have in the past, pursued, and in the future expect to pursue, acquisitions of businesses and assets in new markets, either within the IT industry, that complement or expand our existing business.

As part of our strategic growth plan, we may pursue the acquisition of companies that either complement or expand our existing business.

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In addition to those risks to which our business and the acquired businesses are generally subject, the acquisition of these businesses gives rise to transactional and transitional risks, and the risk that the anticipated benefits will not be realized.

We may incur additional costs and certain redundant expenses in connection with our acquisitions, which may have an adverse impact on our operating margins.

Future acquisitions may result in dilutive issuances of equity securities, the incurrence of additional debt, large write-offs, a decrease in future profitability, or future losses.

When the Company makes acquisitions, it may take on additional liabilities or not be able to successfully integrate such acquisitions .

17 unchanged sentences

The Company ’ s non-U.S.

sales represent an increasing portion of its revenues, and consequently, the company is exposed to risks associated with operating internationally.

In 2024 and 2023, approximately 27% and 26% of the Company’s net sales came from its operations outside the United States, respectively.

sales represent a significant portion of our revenues, and consequently, the Company is exposed to risks associated with operating internationally.

In 2025, 2024 and 2023, approximate ly 23%, 27% and 26% of the Company’s net sales came from its operations outside the United States, respectively.

As a result of the Company’s international sales and locations, its operations are subject to a variety of risks that are specific to international operations, including the following:

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Our operations are subject to numerous complex federal, state, provincial, local and foreign laws and regulations in a number of areas, including labor and employment, advertising, e-commerce, tax, trade, import and export requirements, economic and trade sanctions, anti-corruption, data privacy requirements (including those under the European Union General Data Protection Regulation and the California Consumer Privacy Act), anti-competition, environmental and health and safety.

Compliance with these requirements may require significant operational changes, and violations may result in investigations, fines, penalties, restrictions on our ability to process personal data, and reputational harm.

In addition, privacy and data protection rules, including requirements applicable to cross-border transfers of personal data, are evolving and may be inconsistent across jurisdictions, which can increase compliance costs and the risk of noncompliance.

The evaluation of, and compliance with these laws, regulations and similar requirements may be onerous and expensive, and these laws and regulations may have other adverse impacts on our business, results of operations or cash flows.

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If we are unable to accurately estimate the cost of these services or the timeline for completion of contracts, the profitability of our contracts may be materially and adversely affected.

Changes to United States tariff and import/export regulations may have a negative effect on our Company and, in turn, harm us.

The United States has recently enacted and proposed to enact significant new tariffs.

Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S.

trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S.

trade policies, treaties and tariffs.

There continues to exist significant uncertainty about the future relationship between the U.S.

and other countries with respect to such trade policies, treaties and tariffs.

These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S.

Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact us.

Changes to U.S.

Tariffs, import and export controls and other trade regulations could adversely affect our business, financial condition and results of operations.

We rely on a global ecosystem of software publishers, hardware manufacturers, cloud service providers and other technology partners to market, deliver and support solutions for our customers.

The United States has enacted, and may continue to enact or propose, significant tariffs and other trade measures, and the U.S.

government may modify key aspects of U.S.

trade policy, including the use of tariffs, sanctions, import restrictions and export controls.

Ongoing geopolitical developments and changes in trade policies, treaties and tariffs have created and may continue to create, significant uncertainty regarding the scope, timing and impact of such measures, including with respect to trade between the United States and other countries.

These developments, or the perception that they may occur, could increase costs, reduce availability, or extend lead times for the hardware products that we distribute, and could disrupt cross-border service delivery, support or licensing for software and cloud offerings.

In addition, tariffs or other trade restrictions could adversely affect our vendors' manufacturing and supply chains, limit our or our vendors' ability to transact with certain counterparties or in certain jurisdictions, reduce customer demand, delay purchasing decisions, or compress margins if increased costs are borne within our distribution ecosystem.

Any of these factors could disrupt our operations or relationships with vendors and customers and materially adversely affect our business, financial condition and results of operations.

Financial Risks and Market Risks

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The Company evaluates, on a regular basis, whether events or circumstances have occurred that indicate all, or a portion, of the carrying amount of goodwill or identifiable intangible assets may no longer be recoverable, in which case an impairment charge to earnings would become necessary.

A decline in general economic conditions, a substantial increase in market interest rates, and increase in income tax rates, or the company’s inability to meet long-term working capital or operating income projections could impact future valuations of the Company’s reporting units, and the company could be required to record an impairment charge in the future, which could impact the company’s consolidated balance sheets, as well as the Company’s consolidated statements of operations.

A decline in general economic conditions, a substantial increase in market interest rates, an increase in income tax rates, or the Company’s inability to meet long-term working capital or operating income projections could impact future valuations of the Company’s reporting units, and the Company could be required to record an impairment charge in the future, which could impact the Company’s consolidated balance sheets, as well as the Company’s consolidated statements of operations.

The inability to obtain financing on favorable terms may adversely impact our business, financial position and results of operations.

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Changes in our credit rating or other market factors may increase our interest expense or other costs of capital, or capital may not be available to us on competitive terms to fund our working capital needs.

We may not be able to continue to pay dividends on our Common Stock in the future, which could impair the value of our Common Stock.

We have paid a quarterly dividend on our Common Stock since the first quarter of 2003.

Any future declaration of dividends remains subject to further determination from time to time by our Board of Directors.

Our ability to pay dividends in the future will depend on our financial results, liquidity and financial condition.

There is no assurance that we will be able to pay dividends in the future, or if we are able to, that our Board of Directors will continue to declare dividends in the future, at current rates or at all.

If we discontinue or reduce the amount or frequency of dividends, the value of our Common Stock may be impaired.

We have suspended quarterly dividends and may not resume paying dividends on our Common Stock, which could adversely affect the value of our Common Stock.

Beginning with the first quarter of 2026, our Board of Directors determined to suspend quarterly cash dividends in order to preserve financial flexibility and prioritize our capital allocation objectives.

Any future declaration and payment of dividends will be determined from time to time by our Board of Directors and will depend on, among other things, our results of operations, cash flows, liquidity, financial condition, capital requirements and other factors the Board of Directors deems relevant.

There can be no assurance that we will resume paying dividends in the future.

The suspension of dividends, or any future reduction or continued absence of dividends, could cause the market price of our Common Stock to decline and could adversely affect your ability to realize a return on your investment.

Risks related to our Common Stock .

The issuance of shares by us may dilute your ownership of our Common Stock.

Trading volume in our Common Stock varies significantly based on a number of factors, which may be exacerbated by our repurchases of our Common Stock.

As a result of the potentially low volume trading market for our stock, its market price may fluctuate significantly more than the stock market as a whole or of the stock prices of similar companies.

Without a larger float, our Common Stock will be less liquid than the stock of companies with broader public ownership, and, as a result, the trading prices for our Common Stock may be more volatile.

Among other things, trading of a relatively small volume of our Common Stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger.

Our Common Stock is listed on The NASDAQ Global Market tier of the Nasdaq Stock Market, and we therefore are subject to continued listing requirements, including requirements with respect to the market value and number of publicly-held shares, number of stockholders, minimum bid price, number of market makers and either (i) stockholders’ equity or (ii) total market value of stock, total assets and total revenues.

If we fail to satisfy one or more of the requirements, we may be delisted from The NASDAQ Global Market.

If we do not qualify for listing on The NASDAQ Capital Market, and if we are not able to list our Common Stock on another exchange, our Common Stock could be quoted on the OTC Bulletin Board or on the “pink sheets”.

As a result, we could face significant adverse consequences including, among others, a limited availability of market quotations for our securities and a decreased ability to issue additional securities or obtain additional financing in the future.

The issuance of additional shares of our Common Stock, or securities convertible into or exercisable for shares of our Common Stock, could dilute your ownership interest and could adversely affect the market price of our Common Stock.

Trading volume in our Common Stock may be limited and may fluctuate significantly, and these dynamics may be affected from time to time by our repurchases of our Common Stock.

As a result of a potentially limited trading market and public float, the market price of our Common Stock may be more volatile than the overall stock market and the stock prices of other companies with larger public floats.

In addition, trading in relatively small volumes of our Common Stock may have a disproportionate effect on its trading price compared to companies with broader public ownership.

Our Common Stock is listed on The Nasdaq Global Market and we are subject to Nasdaq's continued listing requirements, including requirements relating to, among other things, minimum bid price, market value of publicly held shares, public float, number of stockholders, number of market makers and certain financial thresholds.

If we fail to satisfy one or more of these requirements, Nasdaq may take steps to delist our Common Stock.

If our Common Stock were delisted and we were unable to qualify for listing on The Nasdaq Capital Market, or another national securities exchange, our Common Stock could be quoted on an over-the-counter market, including the OTC Bulletin Board or “pink sheets”.

In that event, we could experience significant adverse consequences, including reduced liquidity, fewer market quotations for our securities, increased price volatility and a diminished ability to issue additional securities or obtain financing on acceptable terms, or at all.

General Risk Factors

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors